James Pethokoukis

Politics and policy from inside Washington

Supply-side Pawlenty?

Mar 29, 2011 16:08 UTC

My pal Larry Kudlow had a great chat with Tim Pawlenty last night on CNBC. And he pressed T-Paw hard on a lack, so far, of a detailed pro-growth agenda:

KUDLOW: Reagan had flatter tax rate reforms. … Let’s have new incentives.  Let’s stop the double tax on capital gains and dividends and estates and savings and investment. Where are the business tax cuts? We need specifics governor. You’ll turn people on with specific growth measures but you don’t have them yet.

PAWLENTY:  Larry, I think have been in the race for all of three business days now. Nonetheless, I agree with what you said. I’ve talked publicly and repeatedly … whether it’s corporate rates, whether it’s individual rates, whether it’s dividends, whether it’s capital gains, whether it’s the death tax, whether it’s capital equipment … we need to take all of those rates and reduce them as far as we can. We need to simplify the tax code, make it pro-growth, make it more transparent and make it friendlier for investment and the deployment of capital.

And then Larry asked him if he was in favor of a 15-17% flat tax. Pawlenty’s response: “Of course, I support a flatter tax rate. I don’t know if we can get to a flat tax in one leap, but moving in a flatter more transparent direction, absolutely.”

Me:  By not pushing bold reform on taxes from the outset, Pawlenty is in danger of negotiating against himself. Now is the time for big ideas. Beyond that, Pawlenty did talk coherently about a strong dollar — maybe creating some sort of commodity link — and applying Six Sigma to the federal government, which is an intriguing notion.

It’s still early, but it seems to me that with current and potential  GOP 2012 candidate all saying kind of the same thing about Obamacare and debt, taxes are a way for Pawlenty to distinguish himself. He’s not going to overwhelm people with his personality, so why not do it with bold ideas, as Kudlow suggests?

Obama fails ‘Nixon to China’ budget moment

Mar 29, 2011 15:25 UTC

President Barack Obama should get in a New York state of mind. Over the weekend, Andrew Cuomo, the Democratic governor of the Empire State, struck a deal to balance the budget without major tax increases – and five days ahead of deadline. It’s the latest example of how left-of-center politicians, often considered profligate, are better sometimes placed than conservatives to cut spending. Obama is missing a “Nixon to China” moment on dealing with America’s dangerous budget deficit. Consider the following:

1) During the rare times when lawmakers attempt a measure of fiscal responsibility, liberals, generally speaking, prefer to close deficits by raising taxes while conservatives favor reducing spending. But when the spenders do the trimming, it can provide greater confidence to interest groups and voters that the cuts are rational and reasonable. And budget-minded liberal leaders can keep their free-spending legislative allies in check.

2) The phenomenon is global. Starting in 1984, New Zealand’s Labour party slashed the government’s share of GDP by 40 percent over the course of a decade. From the mid-1990s through the mid-2000s, Canada’s Liberals cut federal spending by a third, helping reduce the nation’s debt load from 68 percent of output to 39 percent. Around the same time, Bill Clinton, a Democrat, reached an agreement with congressional Republicans to balance the U.S budget for the first time since 1969.

3) Cuomo could have followed his party’s playbook. In Illinois, Governor Pat Quinn, a Democrat, rammed through dramatic increases in individual and corporate tax rates. Instead, Cuomo opted to eliminate a $10 billion shortfall with a 2 percent spending cut. He may have been worried about his chances for 2016 presidential nomination, but the state’s competitiveness also will have been a consideration.

4) Obama’s decisive moment was last December when his debt commission released its austerity recommendations. But the president has neither embraced that agenda nor given support to a bipartisan group of senators pushing the panel’s plan. Without Obama’s explicit backing, Capitol Hill Democrats will almost certainly kill the effort because it slashes entitlement spending.

When House Republicans come out with their 2012 budget in the coming days, the president may have his final chance to push a comprehensive fiscal reform plan. If Obama’s not careful, it could pass him by in a New York minute.

COMMENT

…which study after study shows brings a return on investment into the economy — unemployment compensation, for instance, injects $1.65 into the economy for every $1.00 of unemployment compensation paid out…

Well now there’s a sure-fire cure for the US economy! Fire EVERYBODY and put ‘em on unemployment – that’ll grow the economy 65%. Just like that!

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